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Sunday, September 30, 2012

All in all, a respectable quarter. I've gotten a decent boost from M&A and biotech so far this year, and I know better than to think that'll continue. I'd like to add some more tech, some emerging market, and maybe even more industrials (though I'm overweight there already).

Friday, September 28, 2012

There are plenty of examples of small companies growing through tough
times in their sectors, often by grabbing share with new and innovative
approaches to old problems. Nevertheless, it is still generally the case
that when the big boys catch a sniffle, the smaller companies suffer
even more.

With major construction and agriculture equipment original equipment manufacturers (OEMs) such as Caterpillar (NYSE:CAT) and Deere (NYSE:DE) looking a little weaker (and their managements sounding more cautious), it's not so surprising that the shares of Titan International (NYSE:TWI),
a maker of wheels and tires for off-road commercial vehicles, have
weakened. Titan remains an ambitious and aggressive company, however,
and these shares look quite interesting as a more aggressive play on
long-term growth in sectors such as mining, construction and
agriculture.

These are not easy times to be in the business of supplying parts and
components for the passenger vehicle or commercial vehicle markets.
Although U.S. auto sales have been quite good of late, business has
slowed in Europe and many emerging markets, while numbers and management
guidance from a host of truck, agriculture and mining OEMs has pointed
to slowing trends as well.

Against that backdrop, I still think it is worthwhile for investors to take a closer look at Dana Holdings (NYSE:DAN).
Numbers have come down a bit, and there are definitely risks in
end-user demand for 2013, but this company's diversification across
geographies, end markets, technologies and customers makes it a
differentiated parts and components company. Coupled with a valuation
that does not seem demanding, the stock is likewise interesting at these
levels.

Question: Will Facebook's new plan for ads help push up its stock price?

Bear's Response
Apart from the debate over whether Apple's (Nasdaq:AAPL)
new iPhone is a great leap forward or the first warning of stalling
innovation, perhaps the most popular topic in finance writing right now
is "What's wrong with Facebook (Nasdaq:FB)?"
and "Can it fix the problem?" It seems pretty clear that the more
starry-eyed investors have had to revise their expectations down, but
Facebook's management has been more assertive lately now that they have
oncoming revenue growth strategies that will make a significant impact.

Thursday, September 27, 2012

There aren't too many auto or commercial vehicle component manufacturers
doing very well in the market right now, as even popular names like BorgWarner (NYSE:BWA) and Cummins (NYSE:CMI) are getting sold on fears about waning global demand. That leaves Modine Manufacturing (NYSE:MOD)
in a precarious position - the company serves both passenger and
commercial vehicle manufacturers, it has a sizable exposure to Europe
and it's trying to execute a restructuring of some of its operations.

Although
there's definitely a risk that Modine's restructuring efforts will
fail, as well as industry-wide risks regarding demand and sustainable
free cash flow generation, the potential payoffs of success make this a
name worth watching.

I don't know whether Jabil (NYSE:JBL)
is really going to succeed in differentiating itself over the long term
from the broader electronics manufacturing service (EMS) industry. What
I do know, though, is that this is a tough stretch for the global
economy and for key end markets like handsets, medical equipment, and
communications/networking hardware. Jabil's stock does look undervalued,
though, and while I think it may be too soon to make a major commitment
here, I can see how this stock could appeal to more aggressive value
hounds.

It has been a few years now since I've had a regular Wall Street desk job, but I still miss having FactSet's (NYSE:FDS)
databases and analytic tools close-at-hand. Not only does this
financial information company offer a very sticky product, but the
company also continues to add functionality and breadth to its platform.
Unfortunately, the Street has long had a love affair with the stock as
well, and I am worried that the process of transitioning from growth
stock multiples to those of a more mature company could be a tough one
for shareholders.

Wednesday, September 26, 2012

Sit-down restaurants have come back into favor over the past year or so, and Darden (NYSE:DRI)
has gone along for the ride ... even though company growth really
hasn't improved all that much. Darden remains a strong player in the
industry, with two of the largest concepts (Olive Garden and Red
Lobster) and sustained double-digit returns on capital. Although Darden
shares don't look like much of a bargain today, the market may not be
through with it yet, as menu revamps could spur better traffic and
earnings.

Tuesday, September 25, 2012

Inflation may be inexorably eroding the value of a dollar,
but achieving millionaire status is still an impressive and motivating
goal. More importantly, it's an eminently attainable goal with hard work
and careful planning. Here are some of the best ways that a younger
person can think of earning a seven-figure net worth over time.

Three Key Questions
When thinking about how to accumulate a million dollars or
more, there are three key issues that people must consider. First, a
job must be accessible for it to offer a high likelihood of millionaire
status. For instance, playing in a professional sports league
dramatically increases the odds of earning enough to become a
millionaire, but professional sports employ less than 5,000 athletes
(among the big four North American leagues). Likewise, virtually every
Fortune 500 CEO gets a million-dollar pay package (or better), but there
are only 500 of those jobs available.

It has been an interesting decade for SPX (SPW),
as the company has gone through spasms of acquisition and divestiture
but really hasn't set the world on fire with its margins, returns on
capital, or free cash flow generation. With most of the business
shuffling complete, and broadly improving utility demand, can SPX show
that it deserves a spot on a list of quality industrial conglomerates?

When you're in the business of processing payrolls for small employers, a weak job market is a definite limitation on growth. Paychex (Nasdaq:PAYX)
has been muddling through this period of weak job creation, and now
there is a new Federal Reserve stimulus program specifically targeting
job growth and employment. It's an open question as to whether this
stimulus will succeed, but it's a near-certainty that low rates will
continue to pressure Paychex's ability to wring profits from its float. That sets up Paychex for a high-quality but growth-poor play on improved employment, and an expensive one at that.

Investors should know in about three to six months if Vical's (VICL)
Allovectin has the clinical credentials to get FDA approval for
treating advanced melanoma. As another cancer immunotherapy company, Dendreon (DNDN),
has ably demonstrated though, approval from the FDA is no guarantee of
attaining commercially viable market share or retaining investor
enthusiasm. So with all of the attention that Roche (RHHBY.OB) and Bristol-Myers (BMY) have gotten for their melanoma drugs Zelboraf and Yervoy, is there enough opportunity left in advanced melanoma for Vical?

I'll give credit where it's due - Red Hat (NYSE:RHT)
did a great job with its Linux business, and management has shown
prudent aggression when it comes to building next acts in middleware,
storage, virtualization and cloud. The question, though, is whether the
company can deliver the sort of growth and margin leverage that the
valuation assumes. So far, it's not looking like a sure thing.

Homebuilders have already had a heck of a run over the last year, with names like Toll Brothers (NYSE:TOL), DR Horton (NYSE:DHI) and Lennar (NYSE:LEN)
all up more than 125% over the last year and up many times over from
the lows in the late fall of 2008. What concerns me is whether these
moves have already discounted a lot of the early gains from the nascent
housing recovery - setting up the possibility that housing activity (and
prices) could continue to improve without necessarily taking the
homebuilder stocks with them.

Valuations in the software sector, particularly among those companies
having anything to do with "cloud," are pretty bonkers right now. That
leaves stocks like VMware (NYSE:VMW) and Citrix Systems (Nasdaq:CTXS)
as what passes for "value." Value doesn't come without a catch,
however, and in the case of Citrix, that catch is the sharp and ongoing
debate about whether desktop virtualization can really catch on beyond
the early adopters who are already on board.

The way tech companies like Apple (Nasdaq:AAPL) and drug companies like Pfizer (NYSE:PFE)
fight to defend their patents, you'd think that success in business is
impossible unless you can lock up your best ideas behind walls of
patents and copyrights. While these legal protections for innovation are
indeed important, a host of companies have demonstrated that there are
considerable rewards to be wrung from brands and reputations protected
by little more than the consumer's ongoing preference for the real McCoy
and the value of the trademark.

Monday, September 24, 2012

I think many investors spend too little time thinking about their
investing horizons when contemplating new positions. Although "buy and
hold until it works out" is probably the default strategy for many
investors, it can lead to some tense moments in the short-term. That
brings me to Cubic (NYSE:CUB), a company which I think has a very interesting long-term outlook, but may well underperform for the next year or two.

Although 2012 has been a tough year for industrial names, hydraulic component players like Eaton (ETN), Parker-Hannifin (PH), and Sauer-Danfoss (SHS) still post quite solid 12-month returns relative to the S&P 500; about 40% higher on average. That makes Sun Hydraulics (SNHY)
a notable and surprising laggard, with the trailing year's return about
40% lower than the market. Sun stands out as a high-quality and
differentiated industrial small cap, but producing an appealing fair
value target takes some effort and above-average optimism.

There's ample business to come in offshore energy development, what with
the huge discoveries of oil and gas in the waters off Brazil, and both
East and West African countries. The question, however, is how much of
that is already reflected in the valuation of equipment companies such
as National Oilwell Varco (NYSE:NOV), Aker Solutions (OTC:AKKVF) and Dril-Quip (NYSE:DRQ). In the case of the latter, it looks like quite a lot.

The stock of enterprise software giant Oracle (Nasdaq:ORCL)
has certainly come alive this summer, but there's more than a little
skepticism about the health and durability of the company's growth.
While bulls think that engineered systems and Fusion applications will
reignite (or at least maintain) growth, skeptics point to Oracle's soft organic growth and threats to its basic enterprise business model. The stock seems undervalued on a cash flow basis, though, and double-digit license growth should tip the balance to the bull camp in the short term.

The United States employment situation really hasn't gotten much better
over the last year, but that hasn't hurt the shares of uniform supplier Cintas (Nasdaq:CTAS)
all that much. Up more than 45% over the past year, it's worth asking
whether investors have already baked in an improving job market - even
if those improvements have yet to show up in the government's
statistical data. Cintas remains a high-quality, well-run business with
some meaningful barriers to competition, but the valuation case is a
little more unclear.

Friday, September 21, 2012

The ongoing slow-motion train wreck that is Spain has dragged down plenty of otherwise companies, and Telefonica (NYSE:TEF)
definitely belongs on the list. Although Telefonica's health isn't tied
to the solvency of Spain as much as other major banks such as Santander (NYSE:SAN) or BBVA (NYSE:BBVA),
the state of the economy there still does make a big difference. With
hefty debt and a global decline in the returns of wireless as an
industry, Telefonica has its challenges. Although the company's debt
load is a roadblock to significant value for the shares today, I
wouldn't completely count out this company (or its shares).

Investors make money on turnaround stories by coming in ahead of the
curve, taking on the risk of being wrong in exchange for the possibility
of outsized gains. Once the notion that a company has made real
progress and improved its operations is generally accepted, usually the
stock has already run up. In the case of ConAgra (NYSE:CAG),
the stock is up strongly on better first quarter earnings, but more
gains could be on the way if the Street accepts that these improvements
are here to stay.

Maybe H.P. Lovecraft was really a prophet of biotech when he wrote "That
is not dead which can eternal lie," as it clearly seems like there are
certain biotechs that come back again and again… and again. While the failure of AEterna Zentaris' (AEZS)
drug perifosine in colorectal cancer led to a major drop in the share
price and the end of a variety of silly rumors regarding the company's
prospects of being taken over by a Big Pharma company, it looks like the
company has once again attracted some hope and optimism.

Another of the many quirks of Wall Street is that pretty much everybody
can know what's going on, and yet still show some surprise when it shows
up in the financials. Adobe (Nasdaq:ADBE)
is in the middle of a business model transition as it shifts customers
from licenses to subscriptions, and that process is messing with the
reported revenue numbers. While the pre-market indications do not
suggest that investors are too worried about Adobe's performance, the
valuation still suggests something less than a full buy-in to Adobe's
ongoing growth prospects.

Thursday, September 20, 2012

Investors always seem to want more information from companies, and
there's certainly a point of diminishing returns for companies when it
comes to their level of disclosure. Nevertheless, I think Bed Bath & Beyond (Nasdaq:BBBY)
is doing its shareholders a disservice by not breaking out its costs
and charges in more detail in its earnings press release. As it stands, I
don't think Bed Bath & Beyond is an especially compelling retailer
at today's prices.

It's always something with Wall Street analysts and investors. So although General Mills (NYSE:GIS)
is doing all right in businesses such soup and baked goods, and
management seems pretty confident that the drought won't hurt margins
much, worries about the Yoplait yogurt business overshadow good growth
in overseas markets. While General Mills may not be a bad option for
long-term income-inclined investors, it's hard to work up a lot of
excitement on the basis of today's valuation.

It's not usually a good idea to hang around and hope that a stock you
sold too soon once before gives you a second chance. Nevertheless, I do
find myself hoping that Old Dominion (Nasdaq:ODFL)
gives me that second chance to buy shares in one of the best-run
companies and best growth stories in the U.S. trucking industry (and
perhaps the U.S. transport sector as a whole). Although this stock has
done quite well already this year and valuation looks a little
stretched, a pullback could change all of that overnight.

Robust valuations are nothing new in the cloud/SaaS space, but NetSuite (NYSE:N)
looks premium-priced, even by those lofty standards. Although this
company certainly is posting strong billings growth today and free cash flow
is ramping up nicely, it's hard to see how the industry can support the
growth expectations for all of its members and I don't know that
NetSuite's rampant success is as certain as the valuation would suggest.

Although the passenger vehicle market has stayed relatively healthy in
the United States, slowdowns in Europe and emerging markets have left
many auto parts companies drifting this year. In the case of Federal-Mogul (Nasdaq:FDML),
it could be argued that macro pressures have hidden some of the cost
improvements the company is trying to make, while the weak performance
of the aftermarket business has likewise weighed on the numbers.
Although Federal-Mogul likely can do better from here, investors should
not lose sight of the risks that accompany the stock.

Wednesday, September 19, 2012

Robust valuations are nothing new in the cloud/SaaS space, but NetSuite (NYSE:N)
looks premium-priced, even by those lofty standards. Although this
company certainly is posting strong billings growth today and free cash flow
is ramping up nicely, it's hard to see how the industry can support the
growth expectations for all of its members and I don't know that
NetSuite's rampant success is as certain as the valuation would suggest.

I've been a FedEx (NYSE:FDX)
skeptic for some time now, and despite a few spikes in February and
March, the stock has mostly chopped around in 2012 as investors try to
digest the impact of slowdowns in Europe and China on global
transportation. Although I still believe that FedEx enjoys too much
benefit of the doubt with the sell-side analyst crowd, I do acknowledge
the value in this company's nearly impossible-to-replicate
infrastructure and its leverage to an eventual economic recovery.
Overall, maybe FedEx is getting within sight of being attractively
valued.

Tech investors and analysts can be fickle creatures - they'll happily
project astonishing revenue growth and breathtaking forward multiples
when times are good, but they'll turn quickly when growth lags and often
over-correct to the downside. None of this is to say that Acme Packet (Nasdaq:APKT)
is automatically undervalued, but it may be worth asking whether
circumstances have changed so much in the past half-year that the stock
should only be worth half of what analysts once said it was worth.

Danaher (NYSE:DHR) is built through acquisitions,
but it's an odd company in that it doesn't necessarily (or even often)
buy great companies. Instead, Danaher seems to focus on buying companies
that can be made substantially better under its aegis. With that
profile in mind, Danaher's acquisition of IRIS International (Nasdaq:IRIS) makes a great deal of sense.

Niche markets are often spoken of poorly, as they don't typically offer
the sort of huge addressable revenue opportunities that tech investors
value. In the case of Ultratech (Nasdaq:UTEK), however, I wouldn't be so quick to dismiss the company as just a niche player.
With opportunities to expand the utilization of market-leading tools
for advanced packaging, laser annealing and LED production, Ultratech
could be looking at several years of above-market growth or a takeout
offer.

You wouldn't really know it by looking at the stock's performance over the past year, but Advanced Energy Industries' (Nasdaq:AEIS)
core markets are not doing especially well. While this company is well
placed as a provider of power conversion systems for the semiconductor
equipment industry and solar inverters, neither the semi CAPEX nor solar
markets have been doing well this year. Better days are almost
certainly ahead, but a market-beating stock may have already captured
some of the gains to come from this recovery.

It feels like investors and analysts have spent the better part of two
decades arguing that power prices in regions like the Midwest and
Mid-Atlantic should be higher than they are. Along the way, several
independent power producers ((including Dynegy (OTC:DYNIQ))
have faltered badly as consumer-friendly regulators and stubbornly
lower power prices have made this a perennial "wait 'til next year"
market. With power prices recently testing historical lows, Exelon (NYSE:EXC) shares have been quite weak. Is this an undervalued high-quality utility story, or just another utility doomed to struggle with lower-than-expected power prices in its core regions?

With an upgrade and an initiation at "Buy" on Wednesday morning, Achillion (ACHN) is back in the good graces of at least some biotech investors. I've been favorably inclined
towards Achillion for a while now, thinking that its NS3 protease
inhibitor sovaprevir (aka ACH-1625) and NS5a inhibitor (ACH-3102) gave
it a better-than-average chance of being a player in the hepatitis C
(HCV) market or, more likely, a target for a company that fears being
left on the outside of this eventual multi-billion dollar market.

There can be a lot of money in targeting specialized insurance markets,
as there's often less competition and substantial rewards for building
up expertise in underwriting. It's a strategy that has served companies
like Berkshire Hathaway (NYSE:BRK-A, BRK-B) and W.R. Berkley (NYSE:WRB) pretty well. In the case of Assurant (NYSE:AIZ),
though, analysts are taking a generally dim view of this company's
ability to continue growing premiums and maintaining a profitable
combined ratio. While the stock is not especially interesting if the
bearish predictions are in fact accurate, financial outperformance could
power a strong recovery in these shares.

Tuesday, September 18, 2012

I've written positively on Neurocrine Biosciences (NBIX)
twice already this year, and I finally took the plunge and bought it
for my own account. Although there's ample risk with this company's
clinical programs, the pipeline addresses some major unmet clinical
needs and could support a price target roughly double today's price.

There's no one right way to value a company, and that seems particularly relevant in the case of American Axle (NYSE:AXL). Investors who rely on discounted cash flow
models are not likely to find much value here, as the company's huge
debt load overshadows even optimistic projections for revenue and cash
flow growth. On the other hand, the company is leveraged to potential
demand growth in pickup trucks and looks potentially interesting on
simpler valuation measures like P/E and EV/EBITDA.

Although not everything that home improvement superstore operator Home Depot (NYSE:HD)
has tried worked, management deserves credit for being ready with a
quick hook when it seems clear that an idea just isn't going to live up
to expectations. That seems to be the case with the company's plans for
China, as management has announced that it will be closing its remaining
big box stores in China and shifting to a strategy of specialty stores
and e-commerce.

Development-stage biotech Targacept (TRGT)
may have once had a bright future and a nearly $30 share price, but
those days are long past. With yet another clinical disappointment, it
seems fair to ask whether Targacept's entire research direction is
fundamentally flawed and whether the company can use the capital it has
left to find a new path … or if shareholders would be better served by
the company simply closing up shop and returning the cash.

I've said it plenty of times, but some ideas are worth repeating -
value-priced tech stocks seldom outperform in the absence of growing
investor confidence regarding growth or significant returns of capital to shareholders. While BMC Software (Nasdaq:BMC)
looks undervalued by many different standards, the company's growth is
unimpressive and there are growing questions about the competitiveness
of its product offerings. As a high-value buyout doesn't seem especially
likely, BMC is going to have to figure out a new path to growth if this
stock is going to work well.

There's not much debate about the quality of the brands that Hanesbrands (NYSE:HBI)
owns. Names like Hanes, Champion and Playtex resonate with consumers,
and when it comes to innerwear, a large percentage of shoppers stick
with a single brand for decades at a time. This company has not always
managed to convert that brand value into shareholder value, though the
stock has rebounded sharply from the lows of 2009. Now the question is
whether management can not only maintain the value of these brands, but
also wring more expenses out of the operations and deleverage the
business.

Friday, September 14, 2012

Natural gas has a bright future, both here and abroad, as an energy
source in a variety of applications. Not only do countries like the U.S.
and China have substantial shale gas reserves, but a host of companies
like Westport (Nasdaq:WPRT) and Clean Energy (Nasdaq:CLNE) are developing technologies to exploit them in applications like vehicle fuel.

For natural gas usage to meet its potential, though, the world needs a lot more infrastructure and that's where Chart Industries (Nasdaq:GTLS)
comes into the picture. By offering good technology that addresses
multiple points in the ecosystem (liquification, storage, distribution,
etc.), this company should have many years of impressive revenue growth
ahead. The question, though, is just how much of this the stock price
already reflects.

While it often helps to have strong end markets when trying to
turnaround or improve operations, it isn't always a prerequisite. LSI Corporation (NYSE:LSI)
management has done a pretty good job of reorienting this business
towards better growth and margin, but key end markets like PCs and
mobile carriers haven't been doing all that well of late. Consequently,
LSI may yet be cheap enough for investors to see worthwhile gains from
here if and when these markets improve

WESCO (NYSE:WCC)
has been doing its best to continue growing in recent years, despite
the fact that key markets making up nearly half of sales have yet to
really recover in a big way. Given the value that WESCO adds as a
distributor, the fragmented nature of its electrical distribution
industry and the opportunity for future growth coupled with better
margins, WESCO is a name that I wouldn't want to be short for the long
term.

Filling a Key Role in a Big Market

WESCO is a
significant distributor of electrical, industrial and communications
products in North America, selling nearly 1 million different products
from 18,000 suppliers to more than 65,000 customers. Although it's one
of the largest players in this approximately $100 billion market, WESCO
has just 6% share or so - highlighting just how fragmented the industry
us.

Thursday, September 13, 2012

The last twelve to eighteen months have not been easy on NuVasive (NUVA).
Once a darling of growth-oriented investors in the med-tech space,
NuVasive got knocked off stride by a combination of sluggish growth in
its core spine market, increasing competition, an IP litigation loss to Medtronic (MDT),
a questionable acquisition, and just a generalized ennui on the part of
investors frustrated with the pace of progress at this small-cap
orthopedics company.

Blount (NYSE:BLT) is the sort of small industrial company that can go unknown and unfollowed for years unless and until it gets a little attention
from the financial media. Although the severe decline in residential
construction has meant challenging times for this leading producer of
cutting chains and other products for the forestry and lawn/garden
markets, the potential offered by end-market recoveries and increased operating leverage makes this a name worth watching.

While there have certainly been some pullbacks along the way, including a nearly 10% decline after fourth quarter earnings, United Natural Foods (Nasdaq:UNFI) has, by and large, basked in the love of growth stock investors. And not without some good reasons - United Natural has delivered excellent growth and market share
gains, and has recently shown some solid margin improvements. I still
think a key fundamental question remains, however, and that is whether
investors are properly discounting what the company needs to spend on
capex to maintain its growth rate into the near future.

Plenty of stocks work even though their models fly in the face of
academic notions of how financial markets are supposed to work. Take the
case of Casey's General Stores (Nasdaq:CASY).
While this company has a business plan that makes ample sense (building
stores in small Midwestern communities) and has delivered good growth
and reasonable returns on capital, the free cash flow generation has not been so great. So although Casey's doesn't work so well from a discounted cash flow perspective, I don't think that's going to hurt the stock all that much.

Tuesday evening marked a continuation of a pretty unfortunate trend for Steel Dynamics (Nasdaq:STLD), as the company once again revised its quarterly guidance
lower. Although Steel Dynamics' situation may not be identical to other
domestic steelmakers, it would seem that investors would continue to do
well in approaching these stocks with caution for the time being.

Wednesday, September 12, 2012

It's been an interesting couple of years for German utility giant E.ON (OTC:EONGY),
and "interesting" is almost never a good thing for a utility. Not only
has the company had to deal with the German government's decision to
phase out nuclear power, but the economic and regulatory environment in
Europe has been slipping around as though trying to walk on ball
bearings. Nevertheless, the company's commitment to expand its
unregulated and emerging market businesses offers the hope of more
growth, though investors may question the likely returns on that growth.

Saving enough for retirement is a big deal, and retirement is just as
real and important for self-employed workers as it is for more
conventional employees. Unfortunately, the retirement savings options
for the self-employed aren't quite as obvious or automatic as they are
for regular employees - whenever someone starts a new job, HR often
tells them about any company-sponsored plans that are available, but there's no similar mechanism for the entrepreneur.

Luckily, there is a wide range of options available to those who run
their own business. While some approaches are compelling in their
simplicity, others allow an owner or operator to squirrel away truly
considerable amounts of money for retirement. Although readers should be
aware that the details and requirements of these plans can change with
the tax laws, here are some of the best options available to the
self-employed.

It is easy to drown in the flood of information available in the financial markets.
There's always one more report to read, one more press release to
peruse or one more chart to interpret. In such an environment, it's easy
to get pulled off course; information intended to help you, can
actually make it difficult to maintain a consistent investment process.

Unfortunately, the market rewards disciplined investing and often
quickly punishes emotional, distracted or disorganized approaches.
What's more, it's easy to forget discipline when things are going
especially well or especially bad. And then there's just human nature –
humans are fallible creatures and even the best find it difficult to
remember or replicate what worked three or four years ago.

Healthcare is a critical factor in the health, happiness and
well-being of people around the world, but most of the attention paid to
healthcare focuses on what can best be called "medically necessary"
procedures. However, what about people who choose to indulge in elective
cosmetic procedures? Plastic surgery is a major global enterprise and
some of the biggest indulgers in cosmetic surgery may surprise you.

Space exploration has long been one of those endeavors that many try to
argue has to be the domain of national governments. Not only does space
exploration carry a huge price tag and uncertain economic returns that
are anathema to companies, but many pundits and observers have worried
that their involvement will somehow sully the virtues of pure science
and/or lead to unrestrained land-grabs that will be hard to adjudicate
in on-the-ground courtrooms.

Anybody with a working memory of the 1980s remembers the phenomenon of
the horror movie villain who just would not die. It didn't matter how
absurd the situations became, or that the sequels were just shameless
grabs for money, the villains lived on as long as there were people
willing to buy tickets or rent VHS tapes, which brings us to today's
topic - bad publicly traded companies that just cannot die.

Whether it's due to the rise of social media and the phenomenon of the
immediate sharing of views and opinions or just an intensification of
the "culture wars" that seem to occur everywhere throughout history,
where we eat and shop now has more political and social overtones than
ever before. In particular, companies are finding that they must be very
careful in how they attempt to position themselves towards Lesbian,
Gay, Bisexual and Transgendered (LGBT) customers.

Buyouts have long been a staple feature of the med-tech landscape. While giants like Johnson & Johnson (JNJ), Medtronic (MDT), and Abbott Labs (ABT)
are often knocked (and often unfairly) for their inability to innovate,
they do excel at marketing. That creates a pretty steady conveyor belt
where smaller, innovative companies create new devices that move the
state of the art forward and large companies gobble them up to goose
their own growth and leverage their existing production and sales
infrastructures.

In many respects, investors are going to find a lot similarities between companies like Ultra Petroleum (NYSE:UPL), Cabot Oil & Gas (NYSE:COG) and Range Resources (NYSE:RRC).
Namely, that these are high-quality natural gas-oriented energy
companies with attractive acreage and drilling prospects, as well as low
operating costs. However, what is also similar between them all is the
relatively low price of natural gas and the extent to which share price
appreciation is going to be tied to improving natural gas realizations.

Investors who like to cast their lot with the darlings of the market will probably never like to own Lenovo (OTCBB:LNVGY).
Although this Chinese PC, smartphone and IT hardware company has ample
growth potential in both emerging and developed economies, the company's
low margins and volatile results keep many people at bay. Although
Lenovo is not going to be a good stock for those who worry a lot about
volatility, there seems to be quite a lot of value in these shares.

Tuesday, September 11, 2012

With its combination of disruptive technology and a large (and growing) addressable market, valuation just isn't going to be what moves or worries investors in Palo Alto Networks (NYSE:PANW) for the next few years. Instead, it will be all about the growth rate and the company's ability to grow market share against large entrenched players such as Cisco (Nasdaq:CSCO), Check Point (Nasdaq:CHKP) and Juniper (NYSE:JNPR).
Consequently, while this stock does not look cheap today, that won't
preclude further gains so long as the growth satisfies the momentum
crowd.

Question: Will the iPhone 5 bring Apple stock to $1,000?Bear's ResponseApple (Nasdaq:AAPL)
is a marvel by any meaningful sense of the word, but gravity pulls on
the marvelous and not-so-marvelous alike. Given the huge revenue base at
Apple and the shrinking quality gap between Apple phones and those of
rivals such as Samsung, Google (Nasdaq:GOOG), Nokia (NYSE:NOK) and HTC, a simple repeat of an old formula may no longer be enough to keep Apple as the big dog.

Ametek (AME)
is an odd, not-so-little industrial company. Although it produces over
$3 billion a year in revenue, it's not widely followed by large
investment banks (though it does have plenty of institutional
ownership). It's also an unusual company in that management is content
to focus on product innovation in niche businesses and stay concentrated
on a component-oriented business model. While the shares are not
especially cheap today, this looks like a classic example of a stock to
put on a watch list in hopes of taking advantage of a future pullback.

Monday, September 10, 2012

The August edition of Rail Time Indicators from the American Association of Railroads once again offers investors an interesting read on several trends
in the North American economy. Although the ongoing declines in coal
traffic are still a revenue risk for Class 1 operators like Union Pacific (NYSE:UNP) and Norfolk Southern (NYSE:NSC), the underlying improvements in industrial traffic are encouraging for the economy as a whole.

Nobody seems to have much love for supermarkets these days. With the assumption being that superstores like Walmart (NYSE:WMT) and Target (NYSE:TGT), as well as more specialized stores like Aldi, will pressure the mass-market end while players like Whole Foods (Nasdaq:WFM) and The Fresh Market (Nasdaq:TFM) take the high end, mainline supermarkets like Kroger (NYSE:KR)
have largely been left behind by the market. Although this company is
an exceptionally well-run player in its industry, management needs to
figure out how to generate more cash from its assets for the stock to be
more attractive.

There's a wide, fuzzy line between "early" and "wrong" when it comes to
investing. It's all well and good to buy quality undervalued names
before the Street catches on, but it can take a lot of patience
to see these stories through to their happy ending. Those are all
points to consider for investors looking at analog chip company ON Semiconductor (Nasdaq:ONNN).
ONNN is a quality broad-based company with diversified end-market
exposure and strong leverage potential. But current business trends are
not helpful, and while there does appear to be real value here, it may
take some time for that value to make it into the stock price.

Investors in freight forwarder UTi Worldwide (Nasdaq:UTIW)
certainly had little reason to be optimistic going into second quarter
earnings. With ocean freight rates pressuring margins and air cargo
demand falling, earnings expectations had been drifting lower for weeks.
Then when FedEx (NYSE:FDX) warned of a disappointing quarter it was not hard to think that investors were bracing themselves for this report.

Consequently, when UTi Worldwide reported a quarter that wasn't all that
terrible on Thursday, the stock enjoyed a good pop. Although the stock
remains undervalued on a long-term basis, it's going to take real
improvement in the underlying markets (and not just relief rallies) for
this stock to work.

Cooper Companies (COO)
(or, more formerly "The Cooper Companies") has done a fine job over the
past few years of making up for lost time. While the company had to
play catch up in the silicone hydrogel contact lens market, it is once
again growing its market share and expanding its margins. Although the
valuation today on these shares does not look all that compelling,
investors shouldn't ignore the potential for further multiple expansion
tied to ongoing share growth and margin expansion - two things that
med-tech investors prize greatly.

It's increasingly looking like getting business from Apple (Nasdaq:AAPL) is a mixed blessing for small-cap tech companies. While investors had been looking for Audience (Nasdaq:ADNC)
to use its solid relationship with Apple (and Samsung) as a platform
from which to build on its voice isolation/noise suppression technology,
it now looks as though Apple has elected not to use the company's
technology in the next iPhone. Not only does that news hammer the
expected profit stream for 2013, it also calls into question the broader
bullish thesis for the company's technology.

Civil libertarians don't like it, but there is big business in
monitoring employees and customers and analyzing that data for
actionable information regarding marketing, customer relations, employee
training and so on. Likewise, national governments are well aware of
the intelligence to be gained through video surveillance and
communications interception. Accordingly, it would seem that Verint (Nasdaq:VRNT) ought to have a fairly appealing addressable market for years to come, while the spin-off/merger transaction with Comverse Technology (Nasdaq:CMVT) will ultimately simplify this company's ownership structure.

It looks like the momentum trade is back "on" for lululemon athletica (Nasdaq:LULU)
as investors cheered a solid second quarter and encouraging third
quarter guidance. With lululemon's comps remaining in the double-digits
and demand continuing to outstrip supply, the biggest challenge for this
company may simply be living up to expectations. Although this remains
one of the strongest-growing and most productive stories in retailing,
valuation and expectations look more than a little breathless.

Sunday, September 9, 2012

Over on the left column of the front page, you'll see a new "feature" - the option to subscribe to get updates by email. So if you're interested in seeing what I'm writing, but don't want to check the site every day, this should be a good option. Not entirely sure how well it works yet, but it may be something you want to check out.

Friday, September 7, 2012

Question: Did Facebook and its investors have realistic expectations for the company's growth potential?

Bear's Response
"What's wrong with Facebook (Nasdaq:FB)?"
is probably one of the most popular themes in financial/investment
writing these days. The poor performance of this stock post-IPO has
plenty of people speculating that there was a social media bubble (and
that the bubble is now deflating), and now there are rumblings that
Facebook is already on the wrong side of its growth curve. While I do
think a lot of the pessimism and criticism of Facebook is overheated
click-bait, I do believe that the company is growing more slowly than
investors expected, and investors may want to take a closer look at some reasons to avoid Facebook.

As a tiny industrial company focused around capital equipment and
generating more than half of its revenue from Europe, it shouldn't
surprise anyone that Hurco (HURC)
is seeing some challenging operating conditions. That said, the company
is managing this tough market reasonably well and while the next couple
of quarters are likely to be touch-and-go, the long-term potential of
this company ought to make it a solid candidate for small-cap investors.

Small-cap med-tech stories rarely have smooth, parabolic trajectories toward success, and radiotherapy company Accuray (ARAY)
is certainly no exception in that regard. While management does deserve
praise for the extent to which it has driven better service margins,
fiscal Q4's sales shortfall and the company's falling share of new North
American placements loom as real concerns. Imminent product
introductions give investors a reason to hang on, but sales execution
must follow if this stock is going to work.

The stock market is a funny place sometimes; one where you may just find
yourself defending a stock you used to criticize pointedly. And yet,
that's where I feel I am with VeriFone (NYSE:PAY).
I didn't like this stock much back in the "what, me worry?" go-go
momentum days and I'm glad I didn't actually short it, as the stock just
kept climbing from 2009 to 2011. Now it's a different story. Investors
have raised questions about how the company reports organic growth and
everybody seems to be getting on board the mobile payments bandwagon.
Although VeriFone still carries pretty robust fundamental valuation ratios every value investor looks at,
this is a company that looks well-placed for ongoing growth. The
question for investors now, though, is whether the company can please a
momentum crowd that no longer seems willing to give the company much
benefit of the doubt.

It seems pretty obvious that once a company figures out a winning formula, it ought to stick with it. Acquisitions have definitely done a lot to build and boost specialty pharmaceutical company Valeant (NYSE:VRX). Now the company is going to the well again to acquire Medicis (NYSE:MRX).
While there's always a risk that Valeant will eventually bite off more
than it can chew, this deal looks like a winner from the get-go.

On more than one occasion I've written of my preference for companies
that serve the processed/packaged food space in favor of those that sell
commoditized fresh/frozen products. That's certainly true in the
protein sector, where I much prefer the prospects of a company like Hormel (NYSE:HRL) to those of Tyson (NYSE:TSN). However, Smithfield (NYSE:SFD) is a curious case. Although it is one of the many ways traders can invest in everyday products, this company has both a sizable fresh and packaged meats business.

Thursday, September 6, 2012

Arguably the only thing more remarkable than the share growth Navistar (NAV)
saw in the first decade of this century has been how quickly it all
went wrong when the company decided to break with the pack and pursue
its own engine emissions technology. The company has seen since the
error of its ways, and though the profitability of the "new" In-Cylinder
Plus Technology and the agreement to use Cummins (CMI)
engines are uncertain, the company can at least start thinking about
getting back to the business of being a respectable truck builder.

Sometimes it's good to just rally the troops a bit. While I didn't see anything especially new in Roche's (RHHBY.OB)
Investor Day presentations, it was a good reminder as to the depth,
breadth, and quality of this Big Pharma's drug and diagnostics pipeline.
History says that several of these currently-promising programs will
fall by the wayside, and Roche's shares are not quite slam-dunk cheap,
but this remains a quality to name to hold in the healthcare space.

With all of the hype that still surrounds the social media and cloud
computing spaces, putting the two together sounds a little like a hype
supernova. To be sure, there is a lot of hype and hope with Jive Software (Nasdaq:JIVE),
a stock that IPO'ed not all that long ago and now sits close to new
lows. Although the valuation on this stock still looks pretty rich, it's
not hard to see that Jive could become a hot property if it can prove
that enterprise customers really are willing to spend money to
facilitate workplace collaboration.

For a company with what should otherwise be a simple business, Campbell Soup (NYSE:CPB)
offers up more than a few questions. Can the company stem its share
losses in soup? Can the company effectively compete with the likes of Kellogg (NYSE:K) and Kraft (Nasdaq:KFT)
in snacks? Does management really have a solid long-term growth
strategy? How you see the answers to these questions goes a long way
toward answering whether this is a good stock to own for the next few
years.

Wednesday, September 5, 2012

The combination of overheated expectations and market weakness in Europe
and Asia has done a real number on energy technology names ranging from
wind power to solar to batteries. With declining revenue momentum in
ultracapacitors, lower overall revenue guidance and worries about both
emerging competition and sluggish end markets, Maxwell Technologies (Nasdaq:MXWL)
has been no exception - dropping almost 50% over the last year.

I'm
starting to wonder, though, if this isn't a good time to start
reconsidering this name. I think investors have been forced towards much
more rational market and revenue expectations, and if anything the
market may now be undervaluing the company's long-term potential. While
this remains a high-risk name with much to prove, sometimes emerging
tech stories work better after a lot of the wide-eyed optimism has been
washed out of the stock.

CMOS sensor company Omnivistion Technologies (Nasdaq:OVTI)
has a crazy stock. Pull up a long-term chart, and you're basically
looking at a map of the Tetons or some such. That chart also says a lot
about the business. While Omnivision has long been at the edge of
technology in the space, the company has been unable to establish a
steady revenue and profit growth trajectory. While I don't expect that
basic pattern of volatility to change much, investors may want to
consider this stock for the potential sales and profit growth that could
be reported with the next major Apple (Nasdaq:AAPL) phone launch.

Tuesday, September 4, 2012

Everybody knows the deal these days on natural gas. E&P companies like Cabot Oil & Gas (NYSE:COG)
have been incredibly successful at finding and exploiting new sources
of natural gas, but the U.S. energy infrastructure has not shifted as
radically. Consequently, inventories are high and prices are low, which
has kept a lid on many of the stocks. Although Cabot's near-term
valuation wouldn't suggest that it's a compelling buy, I think a
longer-term perspective suggests a different answer.

Maybe the worst question an investor can ask about a stock or sector is
"how much worse can it get?," as the answer is often something along the
lines of "a lot." That seems like a relevant point when considering Ultra Petroleum (NYSE:UPL)
- a natural gas-focused exploration and production (E&P) company
that has long been a top-notch operator, but has suffered from
rock-bottom gas prices. It's probably true that higher natural gas
prices are inevitable as export-oriented liquefaction facilities come
online and more energy consumption is shifted to gas, but that's a
multi-year process that still leaves ample room for volatility in these
shares.

It's not uncommon for biotechs to go quiet for long stretches of time,
particularly when they are basically one-product companies with little
incremental data on the way. In the case of YM Biosciences (YMI),
though, shareholders have reason to be a little edgy about the lack of
news. Not only has the company been cagey in discussing its plans for
pivotal trials of its lead drug CYT387, but partnership discussions have
supposedly been ongoing for most of the year so far. While I'm
cautiously optimistic that YM Biosciences does have a real winner in
myelofibrosis, it may well be hard for this stock to outperform without
the seal of approval represented by a Big Pharma partner.

I realize that many readers have little or no sympathy for sell-side
analysts, but I don't envy them the task of figuring out the telco capex
space these days. JDS Uniphase (Nasdaq:JDSU) and Oplink (Nasdaq:OPLK)
recently offered solid beat-and-raise quarters that stoked hopes that
the much-awaited carrier spending rally has finally come.

And then along
comes Ciena (Nasdaq:CIEN);
a company that has been introducing solid technology and gaining share,
but sees less strength in the market right now. As befits its space,
Ciena is a tough stock to figure out. While much more promising (and not
nearly so beaten down) than Alcatel Lucent (NYSE:ALU),
Ciena has to start delivering pretty substantial profit improvements
for the stock to really work. The potential is certainly there, but then
so are above-average risks as well.

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I started this blog as a way of archiving my writing for sites like Investopedia, as well as posting some thoughts on the markets, stocks, or whatever else strikes my fancy.
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You can reach me at tuonela (dot) fool (at) gmail (dot) com

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Information is taken from sources believed to be reliable but no warranty or guarantee is made with respect to accuracy.

Investing involves risk and requires proper due diligence. In no way should a reader should presume this blog represents personalized financial advice or is a substitute for proper due diligence. The author expects you to be enough of a grown-up to realize this.